Broker Note Briefing: Friday

Disappointing results from tech giant Google and a wait-and-see attitude to the final day of the European Union summit meant investors were a little cautious Friday.

We’ve been leafing through the big broker notes to provide you with a snapshot of the day’s ratings changes.

Barclays took a look at the European food retail sector. It downgraded Wm Morrison to underweight from equalweight, while reiterating its overweight stance on Sainsbury.

“The fact that Sainsbury is outpacing Morrison’s sales growth is not new news, but the extent of the outperformance has recently widened to unprecedented levels,” said Barclays. It struggles to understand why Morrison’s sales trends would improve any time soon and said that the latest promotional tool does not seem to be working and more intensive advertising from Tesco ahead of Christmas may worsen things. Morrison also faces other issues, said Barclays. It noted that the share buyback is almost 80% done, meaning a support to EPS and the share price will soon end.

Meanwhile J.P. Morgan Cazenove reviewed the U.K. banking sector and the implications of the shift in the U.K. regulatory stance.

“We believe that the market is yet to fully incorporate the implications of the recent shift in the UK regulatory approach where there is now a framework to force issuance if capital generation falls short of management expectations,” it said. The brokerage downgraded LLoyds Banking Group to underweight from neutral, saying it sees limited upside. It said that with over £34 billion ($54.55 billion) in value of PPI products sold since 2001, eventual costs could be significantly higher than the current £10 billion to £12 billion assumed by the market and that Lloyds is the most

Finally, Nomura initiated coverage of Siemens at neutral, saying it’s cautious ahead of the November restructuring announcement. Nomura reckons the market has already priced in most of the future restructuring benefits.

“With headwinds of price pressure, weakening demand in emerging markets, limited gross margin improvements in the past 10 years, execution risk is higher than the 2008 restructuring and benefits are likely to be back-end loaded,” said Nomura.

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